Indian Renewable Energy Development Agency

Indian Renewable Energy Development Agency


Why in the news?

The government of India recently granted the Indian Renewable Energy Development Agency (IREDA) ‘ Navratna’ status, bringing the total number of Navratna PSEs to 17.  

Shares of the Indian Renewable Energy Development Agency (IREDA) surged more than 12 per cent during Monday’s trading session after the government of India gave the company’s ‘Navratna status’ on Friday. The company informed us about this through an exchange filing. Following the update, shares of IREDA surged 12.45 per cent to Rs 192 on Monday, commanding a total market capitalization of more than Rs 51,000 crore. The scrip had settled at Rs 170.65 in the previous trading session on Friday.

What is Navratna’s Status?

To qualify as a Navratna company, a public sector enterprise needs to meet certain criteria set by the Department of Public Enterprises (DPE) under the Ministry of Heavy Industries and Public Enterprises. Some of the key criteria include:

    • The company must be a Miniratna Category-I enterprise for at least three years and be included in Schedule A of Central Public Sector Enterprises (CPSEs).
    • The company must have a consistent track record of profitability, net worth, and turnover.
    • To attain Navratna status, a company needs to either have a net profit above Rs 5,000 crore for three straight years, an average annual turnover of Rs 25,000 crore over three years, or an average annual net worth exceeding Rs 15,000 crore for three years.
    • The company should have a strong presence in international markets or potential for global expansion.
    • The company must have significant operational autonomy in decision-making. 

Obtaining Navratna status in India greatly benefits Public Sector Undertakings (PSUs). These include greater financial and operational autonomy, allowing for swifter decision-making and improved responsiveness to market shifts. The enhanced freedom also translates to increased investment opportunities, attracting capital for growth initiatives. Further, the Navratna designation serves as a mark of excellence, bolstering the PSU’s market reputation and attracting skilled personnel. This combination of factors empowers Navratna PSUs to operate more efficiently, compete more effectively, and achieve sustainable growth.

About the Indian Renewable Energy Development Agency: 

The Indian Renewable Energy Development Agency (IREDA) is a specialized financial institution in India that promotes and finances renewable energy projects. Established in 1987, it operates under the administrative control of the Ministry of New and Renewable Energy (MNRE), Government of India. In 2015, it received the status of Mini Ratna (Category-I). 

Key functions and roles of IREDA include:
    1. Financing: IREDA provides financial assistance to renewable energy projects through loans, term loans, lease financing, and other innovative financial mechanisms. This helps developers and investors in the renewable energy sector to fund their projects.
    2. Project Development: The agency proactively identifies, evaluates, and promotes renewable energy projects. It assists project developers in project planning, feasibility studies, and structure.
    3. Risk Mitigation: IREDA helps mitigate risks associated with renewable energy projects by providing financial support and guidance. This includes assessing project viability, market risks, and regulatory compliance.
    4. Market Development: IREDA contributes to the growth of the renewable energy market in India by fostering partnerships, collaborations, and knowledge sharing among stakeholders. It also promotes awareness about renewable energy technologies and their benefits.
    5. Policy Support: IREDA collaborates with the government and regulatory authorities to formulate policies, regulations, and incentives to support the growth of the renewable energy sector. It provides inputs based on market trends, industry insights, and technological advancements.

IREDA generates revenue through interest and principal repayments from the projects it finances, as well as by raising funds from the market and borrowing. IREDA is crucial in driving India’s transition towards clean and sustainable energy. By providing financial support and facilitating the development of renewable energy projects, IREDA contributes significantly to India’s renewable energy goals and its commitment to combating climate change.


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Mains Practice Questions:

Q. How does IREDA facilitate renewable energy growth in India? What obstacles does IREDA encounter in funding renewable energy initiatives, and what strategies does it employ to overcome these challenges? 

Q. What criteria must a state-owned corporation in India meet to be granted Navratna status? Additionally, what advantages does obtaining this status offer to a public sector company in terms of growth?

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